Key Areas of Interest for UK Investors in India
India and the UK are keen to strengthen their economic partnership in the wake of Brexit and the pandemic. Both countries are working to facilitate trade and investor ties as well as enhance collaborations in the areas of technology and pharmaceuticals.
India has the third largest start-up ecosystem in the world and the UK has the third largest number of unicorns – presenting opportunities to work together, create jobs growth, and compliment market access and capacity.
While there is no bilateral free trade agreement (FTA) in place, since last summer, trade officials from both countries have been laying the groundwork for an ‘Enhanced Trade Partnership’ (ETP). The ETP is expected to be made official during the UK Prime Minister Boris Johnson’s visit to India, currently scheduled for the end of April this year.
In this article, we briefly discuss UK investment trends in India, which sectors would interest British investors, and what incentives could draw in UK companies to India.
Current UK investment in India
Both countries have made significant investment into each other’s economies, but there is space for further growth.
Data released by the UK government’s Department for International Trade (DIT) in 2019 stated that India was the second largest investor in the UK, having invested in 120 projects and creating close to 5,429 jobs.
In its ‘Britain Meets India’ Report, consultancy Grant Thornton Bharat, in collaboration with the DIT and the Confederation of Indian Industry (CII), stated that the UK was India’s sixth largest investor, having invested a total of US$29.56 billion during April 2000 to September 2020. This is about six percent of all foreign direct investment (FDI) received by India.
The FDI inflow from the UK to India increased from US$898 million in 2015-16 to US$1.42 billion in 2019-20. In fact, according to Grant Thornton Bharat: 572 UK companies in India, with a combined turnover of INR 3.39 trillion (US$46.73 billion), employed 416,121 people directly.
Out of these, 91 companies showing an average growth rate of 26 percent, expected to see their fastest growth in 2021. Below are some examples by company, sector, and state where they are located:
- Dyson Technology (consumer, retail, and e-commerce; Haryana)
- Aviva Life Insurance (financial services; Haryana)
- Diageo Business Services (business services; Karnataka)
- RMD Kwikform (construction and real estate; Delhi)
- FMC Technologies (energy and power; Telangana)
- Safeguard World Payroll Services (business services; Haryana)
Other key findings that the Britain Meets India Report highlights are:
- India-UK bilateral trade in goods and services amounted to US$26.7 billion in 2020.
- Top sectors of interest for UK companies were India’s industrial, business services, technology, consumer retail and e-commerce, pharmaceuticals, financial services, and energy.
- Leading investment destinations for UK companies are Maharashtra, Haryana, and New Delhi, followed by Karnataka, Tamil Nadu, Telangana, Gujarat, and Uttar Pradesh.
- Combatting the coronavirus pandemic has deepened trade and investment partnerships due to collaboration in research, design, and manufacture of vaccines. India also ensured UK’s access to its pharmaceutical products and equipment, such as surgical masks.
- Top UK companies by revenue in India include Vedanta (energy and power; Maharashtra), Vodafone Idea (telecommunication; Gujarat), Hindustan Unilever (consumer, retail, and e-commerce; Maharashtra); United Spirits (food and beverage; Karnataka), Ashok Leyland (automotive; Tamil Nadu), JCB (industrials; Delhi).
- Top UK employers in India include G4S plc (135,000 employees), Vedanta Resources (79,378), and HSBC Holdings plc (36,544), Camellia plc (23,208), Barclays plc (23,000), Unilever plc (21,400).
India’s sector-wise pitch to UK investors
In the interest of increasing the scope and level of bilateral trade and investment engagement, India has begun promoting targeted sectors to the UK. The below table provides information on key sectors and sub-sectors, what is their specific appeal, suitable locations based on concentration of companies, leading players, investible projects, and FDI rules.
Spotlight on Maharashtra state
In general, the UK continues to view India as an attractive investment destination due to its huge and continuously growing consumer market, availability of a skilled labor workforce, infrastructural capabilities and political stability.
Many UK companies have set up in Maharashtra due to the Memorandum of Understanding (MoU) signed between the UK India Business Council and the Maharashtra Industrial Development Corporation (MIDC) on July 3, 2020.
The purpose of this agreement was to enhance the Indian state’s business relationship with the UK, particularly through increased manufacturing and trade. For foreign investors, Maharashtra has traditionally been India’s leading investment destination due to its business-friendly environment, logistics infrastructure and location, which is why it is the top contributing state to India’s GDP as well as for exports.
Maharashtra’s new industrial policy, launched in 2019, aims to further ease doing business and strengthen the existent industrial ecosystem.
Towards this, a dedicated investor facilitation cell and online single window portal under the Maharashtra Industry, Trade and Investment Facilitation Cell (MAITRI) has been set up for the purpose of monitoring the applications of various industry-related proposals.
Also, various industrial units have been established to increase manufacturing capacity in the following sectors:
- Automobiles – located in Aurangabad and Pune
- Cement and steel – located in Marathwada and Vidarbha
- Chemicals – located in Aurangabad, Pune, and Thane
- Engineering – located in Ahmednagar, Aurangabad, Pune, and Nashik
- Electronics system design and manufacturing – located in Pune
- Fast-moving consumer goods – located in Pune
- Food processing – located in Ahmednagar, Amravati, Nagpur, and Solapur
- IT and ITES – located in Amravati, Mumbai, Nagpur, Pune, and Thane
- Logistics – located in Amravati, Mumbai, Nagpur, and Thane
- Pharmaceuticals – located in Aurangabad, Pune, and Thane
- Textiles – located in Amravati, Kolhapur, Nagpur, and Solapur
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